Chairman Michael Townsend called the Special Meeting to order pursuant to
Article III, Section 4 of the New York Power Authority By-Laws. He said the
meeting was to take action on the Power for Jobs and Energy Cost Savings
Benefits programs. He said the notice that is required under the By-Laws to
call a special meeting had been given.

The
President and Chief Executive Officer submitted the following report:

SUMMARY

“On
August 9, 2010 the Governor signed legislation authorizing an extension of
the Power for Jobs (‘PFJ’) and the Energy Cost Savings Benefit (‘ECSB’)
Programs through May 15, 2011. At their August 17, 2010 meeting, the
Economic Development Power Allocation Board (‘EDPAB’) recommended to the
Trustees that they approve the extension of PFJ program benefits to the
customers listed in Exhibit ‘2-A’ and ECSB program benefits to the customers
listed in Exhibit ‘2-C’ through May 15, 2011. It is therefore recommended
that the Trustees approve such extensions and also, as necessary, extension
of contracts for Economic Development Power, High Load Factor and Municipal
Distribution Agency power through May 15, 2011, to coincide with the term of
extended ECSB benefits to such entities for the customers listed in Exhibit
‘2-B.’ Lastly, the Trustees are requested to extend the expiration dates of
the ECSB rates contained in the applicable tariffs (ST-1, ST-1S, ST-35,
ST-50 and ST-50A) to May 15, 2011 as shown in Exhibit ‘2-D.’

BACKGROUND

Power for Jobs

“In
July 1997, the New York State Legislature and the Governor approved a
program to provide low-cost power to businesses and not-for-profit
corporations that agree to retain or create jobs in New York State. In
return for commitments to create or retain jobs, successful applicants
receive three-year contracts for PFJ electricity.

“The program, originally intended to last
three years, has been extended many times by the Legislature. Chapter 59 of
the Laws of 2004 extended the benefits for PFJ customers whose contracts
expired before the end of the program in 2005. Such customers had to choose
to receive an ‘electricity savings reimbursement’ rebate or a power contract
extension. The Authority was also authorized to voluntarily fund the
rebates, if deemed feasible and advisable by the Trustees.

“In 2005, provisions of the approved State
budget extended the period PFJ customers could receive benefits until
December 31, 2006. Chapter 645 of the Laws of 2006 included provisions
extending the program benefits until June 30, 2007. In 2007, a new law
(Chapter 89 of the Laws of 2007) included provisions extending the program
benefits until June 30, 2008.

“In 2008, a new law (Chapter 645 of the Laws
of 2008) included provisions extending the program benefits until June 30,
2009. In 2009, Chapter 217 of the Laws of 2009 included provisions
extending the program benefits until May 15, 2010. In 2010, Chapter 311 of
the laws of 2010 included provisions extending the program benefits until
May 15, 2011.

Contract Extensions and ESCB Awards

“The Authority sells electricity to
businesses under several State-authorized economic development power
programs. These power sales are made through the Economic Development Power
Program, High Load Factor Manufacturer Program, Municipal Distribution
Agency Industrial Power Program and other power sales programs. The
capacity and energy for these sales are provided by market purchases and
supported by other Authority sources, as needed. In some instances, these
customers are served directly by the Authority and in other cases the
customers receive Authority power through resale arrangements with municipal
distribution agencies or investor-owned utilities. Contracts range in
length from 5 to more than 20 years.

“Chapter 313 of the Laws of 2005 allowed
customers from the above-listed economic development programs that would
otherwise be exposed to price increases to apply for benefits under the ECSB
program. The legislation also authorized the Authority to sell certain
amounts of unallocated hydropower into the wholesale market and use the net
earnings from such sales to fund the Energy Cost Savings Benefits. During
periods of lower market prices, the net earnings from the available
hydropower have been sufficient to cover the cost of the ECSB program. In
higher priced markets, however, the Authority has needed to contribute to
the ECSB program. From the inception of the program in November 2005
through May 2010, the net earnings from the unallocated hydropower sold into
the wholesale market virtually offset the customer losses.

Discussion

Power for Jobs

“The
recently passed legislation would allow PFJ recipients to continue with
existing elections (i.e., power contracts or rebates) through May 15, 2011,
with the program benefits administered as in current law. In addition, the
legislation extends the availability of ‘restitution’ for those PFJ power
contract customers that incur aggregate higher costs in the program as
opposed to taking service from their local utilities under standard tariff
provisions.

“Under
the Economic Development Law as amended by the legislation, EDPAB may
prescribe a simplified form and content for an application for such extended
PFJ benefits. An applicant is eligible for extended PFJ benefits only if it
is in compliance with and agrees to continue to meet the job retention and
creation commitments set forth in its prior PFJ contract, or such other
commitments ‘as the board deems reasonable.’ However, in light of the need
to avoid disruption in receipt of such benefits, the legislation requires
that EDPAB expedite the award of extended PFJ benefits and defer the review
of compliance with job commitments until after the applicant has been
awarded extended benefits.

“In
light of this legislative goal that current PFJ program participants receive
uninterrupted PFJ extended benefits, EDPAB recommended that review of
compliance matters be deferred until on or before October 26, 2010. EDPAB
recommended that the Authority approve such extensions for all PFJ program
participants, subject to receipt of proper documentation requesting such
extensions and agreement to the requisite commercial terms.

“It
should be noted that, due to the retroactive nature of this extension, there
could be unavoidable gaps in the continuation of PFJ contract service.
There will likely not be disruption in the provision of PFJ rebates since
they are calculated after the fact.

“The
Trustees are requested to approve contract extensions or the funding of
rebates for the companies listed in Exhibit ‘2-A’ through May 15, 2011. The
actual payment of rebates for the companies listed in Exhibit ‘2-A’ will
continue to be made as in prior years subject to the financial
considerations contained in the Fiscal Information section below. While the
Trustees will not be asked to approve the payment amounts on a monthly
basis, the information will be made available to them when requested. The
total cost of the extended rebate program is estimated to be about $50
million at current market prices. From the inception of the rebate program
in 2005 through the end of 2009, the Authority incurred $202.5 million in
rebate payments to eligible customers, averaging slightly more than $40
million per year.

Contract Extensions and ECSB Awards

“There are 75 High Load Factor, Economic Development Power
and Municipal Distribution Agency program customers whose underlying power
contracts have terms ending on May 15, 2010, or on other dates before May
15, 2011. In order for such customers to receive an extension or initial
award of ECSB benefits, it is necessary to extend their underlying power
contracts. Pursuant to the Economic Development Law, EDPAB has recommended
extension of Economic Development Power contracts, as necessary, so that
such businesses will be able to receive ECSB benefits through the end of the
legislation’s extension period on May 15, 2011. These customers are listed
on Exhibit ‘2-B.’

“ECSB awards serve to moderate rates for
businesses served under the High Load Factor, Economic Development Power and
Municipal Distribution Agency programs. Under the new legislation EDPAB is
authorized to approve extensions of ECSB awards through May 15, 2011. The
legislation extends ECSB benefits to entities that are currently receiving
such benefits and businesses under these programs whose rates would be
subject to increase on or before May 15, 2011. For entities currently
receiving ECSB awards, the legislation provides for continuation of the
existing level of benefits for another year while allowing the Authority to
continue to use up to 70 MW of unallocated Replacement Power and up to 38.6
MW of unallocated Preservation Power to fund the ECSB awards, provided that
any such Replacement Power must be made available for allocation in Western
New York and any such Preservation Power must be made available in Franklin,
Jefferson an St. Lawrence counties during the extension period.

“As
under current law, applications for extensions of ECSB awards are to be in
the form and contain such information, exhibits and supporting data as EDPAB
may prescribe. EDPAB is to review the applications received and determine
the applications that best meet the criteria established for the ECSB awards
and recommend such applications to the Authority with ‘such terms and
conditions as it deems appropriate.’ In order to avoid disruption in the
delivery of ECSB benefits, the bill directs EDPAB to expedite the award of
ECSB and to defer the review of compliance with job commitments until after
applicants have been awarded ECSB.

“In
light of the requirement of the legislation that current recipients receive
extended ECSB benefits with minimal disruption subject to later review of
compliance matters, EDPAB has recommended that the Authority approve
extensions for all current ECSB program participants, subject to receipt of
proper documentation requesting such extensions and agreement on the
requisite commercial terms. Consistent with the legislative goal that
current ECSB program participants receive extended benefits with minimal
disruption, EDPAB recommended that review of compliance matters be deferred
until on or before October 26, 2010. The list of EDPAB recommended ECSB
awarded companies are listed in Exhibit ‘2-C.’

“It should be noted that due to the
requirements of the host utilities and the late approval by the Legislature,
there could be unavoidable gaps in the continuation of service to certain
power program customers that request ECSB benefits. However, the ECSB
benefits will be applied retroactively from May 16, 2010.

“It is
recommended that subject to the new legislation and the financial considerations contained in
the Fiscal Information section below, the Trustees approve ECSB awards to
companies listed in Exhibit ‘2-C’ through May 15, 2011, the cost of which,
at current market prices, is expected to be fully offset by the net receipts
from the sale of unallocated Replacement Power and Preservation Power as
allowed by the legislation. However, as noted above, should market prices
increase to levels higher than that of today, there may be a net cost to the
Authority, which, based on historical results observed during the life of
the program, would not be expected to exceed $20 million. Accordingly, in
such an event, Staff recommends that the Trustees authorize a withdrawal of
up to $20 million from the Operating Fund for the payment of such amounts,
provided that such amount is not needed at the time of withdrawal for any of
the purposes specified in Section 503(1)(a)-(c) of the General Resolution
Authorizing Revenue Obligations, as amended and supplemented.

“Given
the financial condition of the Authority, its estimated revenues, operating
expenses, debt service and reserve requirements staff is of the view that it
is feasible for the Authority to pay the anticipated added costs associated
with the extension of the PFJ and ECSB programs through May 15, 2011 without
compromising its financial integrity.

FISCAL
INFORMATION

“Based
on today’s market prices, the ECSB program costs are expected to be fully
offset by the net earnings from the unallocated hydropower sold into the
wholesale market. The extension of the PFJ program is estimated to cost the
Authority approximately $50 million. Such results have already been
reflected in the Authority’s 2010 Budget and Four-Year Financial Plan
approved by the Trustees at their December 15, 2009 meeting as the extension
of these Programs was included as a key assumption in the preparation of the
financial projections therein.

Recommendation

“The Executive Vice President and Chief
Financial Officer and the Vice President – Marketing recommend that the
Trustees approve the extended Power for Jobs and Energy Cost Savings
Benefits and the contract extensions as set forth above. Additionally, the
Trustees are requested to amend the service tariffs’ Energy Cost Savings
Benefits expiration date to May 15, 2011.

“The Executive Vice President and General
Counsel, the Senior Vice President – Marketing and Economic Development and
I concur in the recommendation.”

President Richard Kessel thanked everyone for attending the special
videoconference meeting. He stated that the resolution before the Trustees
is the extension of the existing Power for Jobs (“PFJ”) and Energy Cost
Savings Benefits (“ECSB”) programs that expired on May 15th. He
said that the programs were extended to June 2nd after which time they
lapsed because the State Legislature failed to agree on a bill. He said the
proposed Energize New York program would extend the programs to more than
one year with longer-term contracts and would enable the Authority to offer
the program to additional customers; however, the Legislature was unable to
agree on the new program. He continued that the Assembly and Senate adopted
and the Governor signed an extension of the current programs to May 15,
2011. He concluded that the extension is critically important to the
existing customers to retain jobs and urged the Trustees to adopt the
resolution.

Mr. James
Pasquale presented the highlights of staff’s recommendations to the
Trustees. In response to a question from Trustee Eugene Nicandri, Mr.
Pasquale said that rebates are paid retroactively; therefore, there will be
no lapse in payments to customers. In response to another question from
Trustee Nicandri, Mr. Pasquale said that the program expires May 15, 2011.
In response to a question from Vice Chairman Jonathan Foster, Mr. Pasquale
explained that if a customer is meeting its job commitments, that customer
is entitled to be in the program until its expiration on May 15, 2011.
Responding to a question from Chairman Townsend, Mr. Pasquale stated that
the PFJ and ECSB programs would cease to exist on May 16, 2011. If the
Legislature passes a new program, all the customers in the existing program
will have to reapply. Under the new program, more power will be available,
enabling new customers to participate. In response to another question from
Chairman Townsend, Mr. Pasquale said that the proposed Energize New York
program will operate under new criteria that will make it more efficient
than the current program. In response to another question from Chairman
Townsend, Mr. Pasquale explained that the proposed Energize New York program
combines 455 MW of Authority hydropower sold to National Grid, New York
State Electric and Gas Corporation and Rochester Gas and Electric
Corporation with 455 MW of market power to make more than 900 MW of power
available to customers statewide. If existing customers apply for the same
amount of power they presently have, there will still be enough power
available to attract new customers. The criteria for receiving this power
would include job creation and retention and capital investment. President
Richard Kessel added that Energize New York would offer long-term contracts
to customers and the ability for the Authority to bring new jobs to New York
State. In response to a question from Trustee Curley, Mr. Donald Russak
said that the estimated “not to exceed amount” of $20 million for the
programs was derived from high-cost historical conditions, in particular,
the year 2008, when market price for electricity was very high. The
potential cost of the program is largely a function of market prices, and
the determination as to the Authority’s ability to pay takes into account
water flows and the Authority’s financial stability and integrity. For
planning purposes, the Authority had assumed there would be an extension of
the PFJ and ECSB programs and therefore, they were included in its yearly
budget projections. In response to another question from Trustee Curley,
Mr. Russak said that if there is a conflict between the payment of the
estimated $20 million budgeted for the programs and Section 503(1) of the
Authority’s Bond Covenant, then the Authority would not be able make any
payments under the PFJ and ECSB programs. In response to further questions
from Trustee Curley, Mr. Russak said that the legislation did not include
reference to the Gross Receipts Tax Credit. In response to a question from
Trustee Nicandri, Mr. Pasquale said that the extensions had been approved by
the Economic Development Power Allocation Board.

The
following resolution, as submitted by the President and Chief Executive
Officer, was unanimously adopted.

WHEREAS, the Economic Development Power
Allocation Board has recommended that the Authority approve contract
extensions and electricity savings reimbursements to the Power for Jobs
customers listed in Exhibit “2-A”; and

WHEREAS, the Economic Development Power
Allocation Board has recommended that the Authority approve contract
extensions to the Economic Development Power and High Load Factor Power
program customers listed in Exhibit “2-B”; and

WHEREAS, the Economic Development Power
Allocation Board has recommended that the Authority approve the award of
Energy Cost Savings Benefit Awards to the customers listed in Exhibit “2-C”;

NOW THEREFORE BE IT RESOLVED, That in
compliance with the legislation described in the foregoing report of the
President and Chief Executive Officer, the Authority implement such Economic
Development Power Allocation Board recommendations, and the Authority hereby
approves Power for Jobs contract extensions through May 15, 2011 for those
companies listed on Exhibit “2-A” and authorizes the continued payment of
Power for Jobs electricity savings reimbursements to the companies listed in
Exhibit “2-A” as submitted to this meeting, subject to the terms set forth
in the foregoing report of the President and Chief Executive Officer and
that the Authority finds that such extensions are in all respects
reasonable, consistent with the requirements of the Power for Jobs program
and in the public interest; and be it further

RESOLVED, That subject to enactment of
legislation substantially in the form described in the foregoing report of
the President and Chief Executive Officer, the Authority approves contract
extensions for the Economic Development, High Load Factor and Municipal
Distribution Agency customers set forth in Exhibit“2-B,” provided the
Authority receives proper documentation requesting such extensions and
agreement on the requisite commercial terms; and be it further

RESOLVED, That the customers’ service
tariffs be modified accordingly to reflect the extension of the program as
shown in Exhibit “2-D”; and be it further

RESOLVED, That based on the
recommendation of staff, it is hereby authorized that payments be made for
electricity savings reimbursements as described in the foregoing report of
the President and Chief Executive Officer in the aggregate amount of up to
$50 million for all extensions of such programs after May 15, 2010 and it is
hereby found that amounts may properly be withdrawn from the Operating Fund
to fund such payments; and be it further

RESOLVED, That subject to enactment of
legislation substantially in the form described in the foregoing report of
the President and Chief Executive Officer, the Trustees approve Energy Cost
Savings Benefit Awards to the companies listed in Exhibit “2-C,” for the
period through May 15, 2011, in an amount up to $20 million net of receipts
from the sale of unallocated Replacement Power and Preservation Power as
allowed by legislation; and be it further

RESOLVED, That such monies for the
electricity savings reimbursements and for the Energy Cost Savings Benefit
Awards may be withdrawn pursuant to the foregoing resolution upon the
certification on the date of such withdrawal by the Senior Vice President –
Corporate Planning and Finance or the Treasurer that the amount to be
withdrawn is not then needed for any of the purposes specified in Section
503 (1)(a)-(c) of the General Resolution Authorizing Revenue Obligations,
as amended and supplemented; and be it further

RESOLVED, That the Senior Vice President
– Marketing and Economic Development or his designee be, and hereby is,
authorized to negotiate and execute any and all documents necessary or
desirable to effectuate the foregoing; and be it further

RESOLVED, That the Chairman, the Vice
Chairman, the President and Chief Executive Officer, the Chief Operating
Officer and all other officers of the Authority are, and each of them hereby
is, authorized on behalf of the Authority to do any and all things, take any
and all actions and execute and deliver any and all certificates, agreements
and other documents to effectuate the foregoing resolutions, subject to the
approval of the form thereof by the Executive Vice President and General
Counsel.